NCPA - National Center for Policy Analysis


May 25, 2010

About one third of employers subject to major requirements of ObamaCare may face tax penalties because they offer health insurance that could be considered unaffordable to some employees, a new study says.  

The survey, of nearly 3,000 employers, by Mercer, one of the nation's largest employee benefit consulting concerns, found that one third of employers had some workers for whom coverage might be "unaffordable."  One provision of the law says that if employee premiums that cost more than 9.5 percent of their household income, the coverage is deemed unaffordable, and the employer may have to pay a penalty. 

To avoid the penalty, employers could: 

  • Increase their contributions to premiums.
  • Reduce the workers' share of premiums but recoup the money in other ways -- for example, by increasing co-payments or deductibles.
  • Offer lower-cost health plans, with less generous coverage.
  • Charge lower premiums to workers with lower wages. 

Meanwhile, a study by the National Center for Policy Analysis (NCPA) shows that tax credits in ObamaCare could negatively impact small business hiring decisions: 

  • The new law provides a 50 percent tax credit to companies offering health coverage that have fewer than 10 workers who, on average, earn $25,000 a year.
  • The tax credit is reduced as more employees are added to the payroll.  

The NCPA study finds the reduction in tax relief to be a cost concern for companies looking to hire additional workers, but operate on slim profit margin yet still provide employee health coverage. 

Source: Report, "Health law could mean penalties for one in three employers," Medical News, May 24, 2010; Robert Pear, "Study Points to Health Law's Penalties," New York Times, May 23, 2010; and Devon Herrick and Pamela Villarreal, "Obama's Tax on Job Creation," National Center for Policy Analysis, No. 703, May 18, 2010.

For text: 

 For N.Y. Times text:  

For NCPA study:  


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